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combat any inflationary pressures that come down the road and the recovery has been leaning on the side of being moratoria. so we will end on a relatively optimistic note. thank you so much to everybody. [applause] >> on c-span2, jane harman and president obama's defense department who heads the cia. and those facing foreclosure. and later, the fiscal cliff deal. >> i enjoy the capitol hill coverage because i started there many decades ago.
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there are certain committee hearings that are very informative to the public. i like the way that c-span covers and in the way that they present themselves. in his commentary, but not edited out. it gives a real sense to the american people. >> c-span is created by america's cable company in 1979. yesterday, president obama nominated john brennan had the cia. and a discussion took place with chuck hagel and jane harman. >> we are with jane harman, who is now with us.
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she served on the intelligence committee from 2006 to 2007. let's begin with the pick of john brennan. what does this entail? >> guest: he has been the center of obama's intelligence committee for four years now. he has managed the terrorism program quite well. and he is the gentleman that obama trust the most. i think it is an extremely good appointment. >> host: what does the job entail? >> guest: it is a different job than what it was in 2004. in 2004, four of us in congress but the fight for intelligence
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reform and we restructured our intelligence community to have a joint commander. that person is called the director of national intelligence. the current one is james clapper and he is a military man from the pentagon. under him, there were others. there were also others that had intelligence roles. but now it is our primary agency and it will become even more crucial if you have seen zero dark 30, even though i think a few aspects aren't accurate. it shows the roles that were played in identifying the courier and there are critics.
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>> yes. >> senator john mccain is one. he says that he wants to take a closer look at the interrogations policies under the bush administration. including john brennan's involvement in them. >> guest: i applaud him. he has been saying forever for so long as to why this is important. and he is right, in my view. i think we should look at interrogation policies and drone policies and john brennan before this nomination.
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he asked to talk about the legal framework around the policy. drones are tool and a lot of our foreign policy needs to be defense. and one of the things i hope you will do is take a fresh look at the paramilitary part of the mission that should be with the pentagon, which has an exception of intelligence. the rest should be the more traditional aspects. and he understands that because he was there for 25 years. i'm talking about him as the principal part of the military function of the cia and having a huge role.
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it follows very careful, legal steps. i disagree with portions of it, but what i am saying is that the role should be reduced. i actually think drone missions should be reduced. but the pentagon should be the place where paramilitary activities are launched and interrupted. it should be moved out of the cia into the pentagon. >> host: who calls the shots. >> guest: ultimately the president dies. this has all been reported. these are highly secret masson's. but a lot of this happens and i cannot discuss the specifics.
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>> host: foreign policy challenge, can you name that? >> guest: it is not a policy role. it is what the director and agency is supposed to do in speaking truth to power, predict information about the future. it is analytical in a predictive agency so that policymakers can make the very best decisions. good intel will not guarantee the right policy positions, but that intel can wind up affecting it please call our numbers speak
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with us. independents are listening as well and we would love to get your phone calls here. let's get your reactions. >> intelligence often demand secrecy. it is important that there be a full and open discourse on intelligence matters with the appropriate elective representatives of the american people. although i consider myself a republican or neither a democrat, i look forward with working with those on both sides of the aisle. >> host: what did you hear there from john brennan? >> and heard an important statement. during my eight years on the house intelligence committee, i had a lack of information with
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congress. they are an independent branch of government. we are the ones that authorized legislation and appropriate funds. especially in the first half of the bush administration. there were enormous frustrations that had happened on some issues. john brennan understands that that has to be corrected in recent years. and i think that the current members of the house and senate will find a good partner in john brennan. going forward, if he decides to restore the mission to a more
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non-robust military mission, it may require it -- i don't know, but i think we need a new legal framework for the post-9/11 world. and i think we have pieces of policies that are cobbled together. the patriot act, which is highly controversial. it all just sort of works. but there are serious issues about interrogation policies. and as i have said, i have strongly spoken to john mccain about that. and there are also other issues on how we do these intelligence missions.
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we have rogue actors who tried it attack borders, we have many different kinds of challenges. i think many will want to look at this. this includes a member of the cia external board. i would personally want to contribute to that legislation and we will want to work closer. >> okay, the first phone call we have is from bob from chicago. >> caller: hello, you just touched on 2009 end it was quite controversial at that time. there was supported rendition like drones and so forth that were part of the administration
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program that the democrats criticized at that time. obama has now institutionalized those programs. i am concerned because there is no consensus on those issues. i have questions for you. >> okay, the precise circumstances are not exactly -- i mean, i think they will come out as everything comes forward. the chargers were not completely fair. you just heard me say that i think we need a clear framework. it is something that i strongly supported and voted for. in a variety of ways, i believe we can do a better job.
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my understanding is that there was a "washington post" article that i read recently that talked about a practice that conforms to the old renditions. if there are things that we discussed publicly about this, i am sure that there could be classified portions of that. but i hope you will agree that some aspects of her intelligence missions, because sources and efforts can be compromised, that can lead to legislation needed to know about those things in the right way. putting all of that in the newspaper and on the airwaves, it can get people killed, and you have to be very careful.
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>> i think he is a capable man. i would certainly interact with him and my role with the cia. i think he was very gracious yesterday and that is not to go through. john brennan has been kind to him and mike morell is a very talented cia person. >> that explains why he was acting director, i suppose. the emphasis has been on the cia >> well, david petraeus is a genuine american hero. what he did, the president had
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the right to accept his resignation. be that as it may, it can abruptly cause dislocation in any institution. mr. morel stepped in as director and he managed extremely well. and i think a lot of the policies that were started will be continued. one of them is to take a look at women in the cia and that was a committee of the external board that was started. it was underway when he resigned >> host: yes, it was noted about obama's defense. >> as i have said, numerous times, security is a women's
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issue, and what i mean by that we are protecting in terms of our kids and homes. we are all qualified to sit at any table anywhere. it can even be endorsed in other areas. there are 16 intelligence agencies now, there have never been any women in charge of the cia, but many are very competent. some, i would hope, very soon we will have a woman cia director
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and secretary of defense. >> that's very flattering. i appreciate that. >> host: has anyone contacted you? >> guest: i really don't know for sure. but this is a field that i am truly passionate about. and i hope to play a role that supports our intelligence mission and to be a head of the nonpartisan wilson center. we are in a very good position and we want to do the best that we can to help. >> host: intelligence is our topic today. please dial in if you'd like to
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ask a question or make a comment. the numbers are at the bottom of your screen. >> caller: thank you for taking my call. it is a delight to see you. you are looking as marvelous as ever. >> host: thank you. >> caller: in everything that you participate in, you were just marvelous. i think your motherless was is not limited to honesty.
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>> caller: when a democrat chooses a republican, take chuck nagel. he has so much knowledge of congress. that is the key thing. >> yes, i guess we will see. >> host: my guess is he will be concerned by a large margin in the senate. people are not getting i think
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that his qualifications are very fair and james, you are right. he was a decorated hero, an enlisted man in the vietnam war. i think that will make a difference in the department. i think that we have budgetary issues and how well we can find things, how we should cut back on the budget stand 17 years and
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i agree with chuck hagel that there are some things that we can cut and we need to be smart about what we cut. we don't want to compromise any missions. the threats against us are serious. >> we need to cut the legacy systems and put a more limited amount of funds in the right places we can protect our country. >> host: that will be our topic at 830 eastern time. we talked about the pentagon's budget and what they are facing with these pending cuts, as well as the secretary of defense with chuck hagel and his thoughts and his thoughts about the pentagon. hello, bobby, you were the next.
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are you with us? >> caller: hello, i would like to say thank you to everybody at c-span. i just have a question. i just have a question about the representation of aipac and agents that correspond with america. >> guest: let me respond to that. i have been writing from the justice department that i was never the subject of any investigation.
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unfortunately in the atmosphere of today, people, or whatever reason, do not always wish you all success and are always able to make charges. sometimes those things have a shelf life. i appreciated and i am happy for the opportunity to respond to. >> host: we have a question on twitter. is it fair to assume that there are cia operations that are not disclosed? >> the answer to that is yes. but if they did the definition of covert action, they have to be disclosed.
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>> guest: leaders of congress felt leaders of the intelligence committee was in that group while we were members of the house intelligence community. it was a very turbulent period. i can say that this letter was classified and that is why i talked about it. i wrote a letter in 2003 on which i was briefed. the general counsel to the cia -- it was the policy guidance that one had. we were all very scared about
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this. but in writing, i also told the cia not to destroy any videotapes that had been made so that we could look back and see what happened. in violation of my request, this was done. >> caller: my question is terminology that has been used several times. including that of the legal framework. i wonder if james can be a little bit more pacific about framework. in other words, as the law is instructive now, are there any other interesting restraints. would she like to see changes.
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maybe so different agencies can interact differently. i would just like a little bit more information. >> guest: i thank you for the very thoughtful question and i think i've been a little bit vague and i would like to answer that. order to do this, how that should work is very complicated. this is what the foreign intelligence back has to do it.
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messages have gone between a phone number and another phone number or between an e-mail address and another e-mail address. perhaps some of those involves obligations. what can we do to drill down and go further? that is what congress struggled with a few years ago. >> when you go down to a specific conversation, you have permission. there are a lot of issues like that that need updating because
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communications are different in the 21st century. we have revisited to how we interrogate people and learn about their communications with other people and how long we can preserve data and a counterterrorism policy and how it preserves data. at any rate, putting it all together. is the post-9/11 version and a set of u.s. laws that comply with our constitution. it is because of the way we will
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win in this aggressive challenge of terror. we have to explain ourselves and live our values. one of our paramount values is abiding by the rule of law. we have to be able to explain this clearly to other people. that is why i think doing this in a way that is explainable will not only help us conduct ourselves better, but will help us with others and even when they hope for a better world and hopefully they will come here. >> host: we will get truthful
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answers coming up next. well, i think the senate has every right to demand and expect people to testify. ..
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what she knew, what she thinks in the state department i know because i serve on her policy board that has taken a set of corrective steps and we will never do perfectly in the future, but we'll do substantially better and we must. >> were showing pictures of her meeting yesterday where she received a home of our staff as well as a football jersey with the number 112. the member countries she's visited as secretary of state. >> it's astounding and punishing schedule i'm of course not going to reveal my age, but i'm not very she is. no sleep, eating on airplanes, not enough exercise is not a good recipe to stay healthy. hillary, are you listening to me? >> host: independent collar. thanks for waiting, caller. >> guest: thinks. i went to see the collaborate on
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how john brandon will meet the obama administration's received asian tilt and more importantly with the unrest in central africa, had the cia plans and tackling that. >> guest: good question. remember come the cia doesn't make foreign policy. the foreign policy team has decided to rebalance their focus on asia and obviously appropriately to focus on mali and in particular, which is a field state, where we have reason to believe this again is in the price, that a lot of terror organizations are grouping and training. the cia's role is only to provide intelligence about these parts of the world, not to make policy. i have worried over the years and adding that john brennan has, to, that too much of our
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intelligence practical. it focuses on who's coming up with the next hill on the battlefield. i think everybody gets it. most of afghanistan over recent years, how the wars are going to come out. it is a good idea to restore some of our focus on other parts of the world, including asia. i would hope that every bill and says the former policymaker and someone who has a policy institution, i would hope to rebalance tuesday show will focus on how we make relationships with china and others are difficult. i hope we focus on how we join with the region to create a larger trading relationship with the united states and to understand better ways in which we can become closer friends
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with china and france at the region. i think i would be in everybody's interest. to the extent that the cia gives us information about leadership changes in japan, china and south korea and the last six months have better information about other trends than our policy in asia will be better and hopefully more congruent. >> host: with 10 minutes let with former congresswoman jane trained to commit served as member of the house intelligence committee from 2003 to 2007. now the ceo of the wilson center. linda and millerton, new york. >> caller: good morning. i have a three-part question for jane. i would like to have really fast short answer so i don't take a lot of time.
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jane, what changes would you like to see made to our constitution? >> guest: i haven't in this area of intelligence, i'm not recommending any. i would personally like the equal rights amendment in some lifetime, but i don't notice ever going to happen. >> caller: what should be the response of americans to the united states supreme court justice ginsburg ripping of our constitution saying that it is old and no longer relevant? should she be removed from the bench for breaking her oath of office? >> guest: i'm not sure i fully understand that. ruth peterkin spoken my maggie was very confident and conscientious woman. if you're talking about the egyptian constitution, the one
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just ratified by the egyptian people come and accepted to them. there are some issues about the constitution. some of the phrasing is vague and matters who will interpret the constitution. i've been to egypt pretends in the last year and i'm very interested in the transition in egypt and i have urge forsyth, the morrissey government, missile base government and the so-called secularists were basically the other side to improve political skill so they can do with each other better and make some compromises. i don't have the same advice to the united states congress. >> host: linda, one more point. >> caller: just answer my question. he took a lot of time sidelining my question. what should be done about supreme court justice ginsburg's ripping of our constitution to the egyptians?
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she said it is sold in a longer relevant and she has a hard time working under it. >> guest: you can understand i misunderstood your question. i doubt recall that statement. some people -- most people, including me applaud the fact we have the oldest living constitution and the supreme court sometimes interpreted in ways that i strongly agree with the 10 times as in the citizens united case does things that i disagree with it through us every more generalized nature, so be it. i'm surprised to say she would ever write that the constitution doesn't comport so i don't know how to comment about it. i think our constitution is an enormous impressively document. >> host: what effect might be of concern in transitioning cia coordinated drum strikes to dod
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execution of them? >> guest: dod does execute drug strikes. there were two statues. one is title x and won this title 50 and the work more or less together. one of the reasons we operate this way in recent years is that we have had a cia director who then became secretary of defense. that is leon panetta. we have a highly decorated military leader who then became cia her. devastated petraeus. i am suggesting it is time to take a look. this is an easy policy change that with the cia has become in this era of terror i suggest the paramilitary emissions be reduced substantially and at the drawing function becomes much more centered in the department
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of defense and that the cia go back to barco had to be. mission that calls on some of his old traditions. the human spies, strategic intelligence taking longer looks around the world and i think that john brennan is skilled at doing this. he worked for 25 years before there was a drone program. to his credit and make u.s. to come to the wilson center and talk about legal limit surrender program and he has said and many have said that a strong policy does not affect it and i strongly agree with that. it doesn't mean they're not a tool in a toolbox. they aren't really done. we need other tools in diplomacy and development in the purview of the state department are crucial foreign-policy tools, which i think need to be and to. >> host: our producer found this on "american spectator" about justice ginsburg comments
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about the constitution in case our viewers want to go from an interview aired on monday. you can redevelop their peers to close the u.s. constitution in comparison to teach a, the united states is a very new nation, yet we have built this written constitution and the world. she goes on to sam that look at the constitution of south africa as opposed to u.s. constitution if you are drafted 2012. ralph, highland park, illinois. >> caller: hi, how are you doing. >> host: ? >> guest: a question and perhaps a comment if we have a chance. has to do with the multiplicity of the intelligence agencies we have in the united states. i think there's 11 or 13 of them. it seems to be a little bit ridiculous and then this whole idea, the construct of creating
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the dni and somehow relegating the cia to a second-place kind of thing. i'm not sure what the dni does. the other comment i have is about the fusion centers that nobody seems to be talking about that are built in the number of places in the united states hiring legions of people. we don't know what they're doing and nothing is said about it. >> guest: that may respond to those. we do have intelligence agencies if we were redesigning this question, would we build it this way? probably not. but i think you would agree that our intelligence, leading up to the war in iraq and i relied on the intelligence and made the wise that. it was bad for a very good reasons.
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called curveball we never directly interviewed. we had clues in the fbi, that the fbi didn't do so for the, is better. those of us in congress on the intelligence committees looked at how to fix this, we came up with a model that in my view fix the pentagon. the pentagon new search services. the army, navy and the other services basically staffing inside doors, not technically true, but they would equip themselves differently. command structures were separated. so we decided to do with the military did under so-called goldwater-nichols, were each right command was created. he can come from many military service over the foreign military services and i now train and equip and fight wars together.
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so the dni, director of national intelligence is situate commander across 16 intel agencies and they now fight in equip together and he leverages their strengths to produce intel products and our national intelligence estimate, nies, but that both of how weak it intelligence to policymakers are enormously improved since we did this organizational change and i support it. on the fusion centers, that's a whole different thing. those are vocal centers that have grown up to serve local law enforcement and it pulled together national intelligence streams they get from homeland security department or the fbi for streams of local intelligence and they share it, usually in a command center. the homeland department has tried to insist on privacy
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protections in these agencies and found standardization and support. this is a work in progress. some of the work in los angeles who would not be surprised to learn works very well. i've been neck and a fun activities, but some other activities that survey. we need to work on that and i assume we will work on that in the 103rd congress. >> host: you touched on this before, but john brennan's nomination committee think he gets confirmed by the senate? >> guest: yes, i think they both should be, surely john kerry and no one is saying he won't be confirmed. but i think they should be asperger's questions and the confirmation hearing. that is the prerogative of the senate. you know, this is a democracy. some will vote against them.
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their constituents just whether they made the right decision or not, but at the end of the day, number one, the president should be entitled to his nominees and he is our president and he was selected by a substantial margin in november. number two, these are qualified people who i think after they are subject to scrutiny, which they should be, will serve our country well and is an american citizen and someone who directs an organization that's nonpartisan can assemble a good amount of scholarship and serious focus. i certainly would like to help her after succeed in the next four years. >> host: you have this role of the wilson center. >> guest: i'm very happy with the job i have. i'm on the advisory board for both organizations is the state department and director of
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national intelligence. i feel fortunate to have us to do that. it has to continue to serve, i will continue to serve. >> host: busy person. thank you for spending some time with the "washington journal."
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most? famous's mini-stack needs its own capital to help the government so were. hadi lamar, grew person, all part of a contingent of some 50s green celebrity giving time and talents for the national war effort. >> what we want to look at today is how popular culture presented the war. i was presenting the visas and 1840s? how is it presented and, folks in the 1940s? how is it presented an athletic events in the 1930s and 1940s? how is it presented an kingpin alley in music from the 1940s?
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>> supporters and opponents of eminent domain to help distressed homeowners debated the issue at the center for american progress in washington. some local governments consider using eminent domain to take over mortgages on homes underwater shooter that foreclosures. it is a pouty face legal challenges from lenders before these proposals proposals go into effect. this discussion is an hour and a half. >> -- vice president for economic policy here and thank you all for coming. it's an issue same time for the housing market. i suppose they could've said that at any time in the last five years or so, that things are changing a bit after more than five years of decline markets around the country seem to be doing somewhat better.
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home prices going up, home construction showing signs of life and in foreclosures are at a five-year low. on the other hand, we are still suffering from a serious overhang from the crisis. more than 4 million households have lost their homes through foreclosure and this is bad for families, bad for communities in that pursuit of local budgets. on top of that, home price declines wiped out roughly $7 trillion in household wealth and left within 10 million families under water in the mortgages, owing more than homes are worth. in particular hearty community such as las vegas and san bernardino, more than half of homeowners underwater and anybody more than half of their home's value. so this is creating some significant problems. for one thing, underwater homeowners are at greater risk of foreclosure in part because of the event of some other
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financial setback, the borrower has no cushion to fall back on in negative equity constraints lending beyond the housing market since small business owners, college students and the elderly often relied on home equity for capital or collateral. this also impacts on aggregate demand in the economy, a negative wealth effect. so there's not much that there's a drag on the economy. potentially miller's question is which do about it, which brings us today's program. we'll be discussing one innovative and controversial for the use of eminent domain to seize underwater mortgages owned by private investors, right on the principle and refinance the loans have roughly the current market value. this is an idea that it sparked a quite heated debate. it's not favored by many market investors and groups see it as a
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last resort way for finally deleveraging debt and avoid unnecessary foreclosures. the question for today is whether this is the right policy to fix the problem. briefly before we get to that, i would just like to say the housing team is grappled with the problem of underwater mortgages for several years. for example, released a plan for her principles to shared appreciation and we've called on the federal housing agency to provide services to reduce principal loans owned by fannie mae and freddie mac. in the back we have these proposals and other materials reproduced on the subject. you can find them on the website. back to today. they've got a panel of experts on both sides of the issue and i'm looking forward to hearing from them. let me introduce them briefly. steve gluckstern is the chairman
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of each resolution partners, a firm developed proposal to reduce market principles using eminent domain and is in discussion with municipal governments across the country. prior to work with mrp, steve cofounded alternative asset range that firms is a trust company llc and z partners as well as the specialty financial reinsurer center. congressman brad miller is a recently retired representative from north carolina's 13th district. during this fight turns -- five terms in the house, congressman miller served as a leading champion for consumers in the fight against predatory mortgage lending and servicing practices. tom deutsch is the executive director of the american securitization forum, an association for investors,
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issuers and stakeholders in the securities industry has opposed the call for eminent domain for marketers. previously tom was the associate at cadwallader llp and mickey mouse in llp, where he worked on finance offerings and residential mortgage securitizations. jim carr is a senior policy fellow at opportunity agenda, where his work focuses on housing finance and financial services in underserved communities. she was previously the chief business officer in the community reinvestment coalition. before that, served as senior vice president for financial innovation at the fannie mae foundation. finally, moderating our panel will be director of housing finance and policy, julia gorton. prior to joining c.a.p., julia managed the policy team of the federal housing agency.
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she previously served as senior policy counsel at the center for responsible lending. so take it away, julia. >> thank you, michael. okay, everybody ready? were going to start with questions for the panel and start up a conversation appear. after a while, we will open the floor to questions from the audience as well. i hope you're thinking about what she would say to ask all of the folks appear. but that, we'll just start with a general question appear. i'll start with mr. gluckstern. where are we the foreclosure crisis and in particular as we heard michael discuss, how big of a problem is negative equity and for whom? >> will start with the first part, which is where we. a lot of people think it's behind us and we are now driving forward. i would urge you in fact making
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the number 4 million plus or minus american families have lost their homes already, but by almost any measurement, somewhere between three and 8 million more will lose their homes if we don't do something. so i would argue it is not in the rearview mirror. in fact, it is out in front of us. who bears the cost here? there's lots of consequences. first and foremost is the families themselves who are disrupt this and taken from their homes. his work again about numbers for a second. i mean, we're talking about three, four, 5 million more families, as many as 20 million more americans. mike also alluded to when you're underwater, your behavior changes. you don't spend as much money on anything. the only thing you consume more of his health care because under the stress we can look at those numbers. that's the thing that goes to. the costs are significant.
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obviously to the communities in which these people live. foreclosures cost hard dollars in soft dollars. their property tax issues and are felt by all of us. >> to have anything to add to that? what i wrote docs solutions? >> i don't know whether we've hit bottom or not. one of the firm rules of economics as if something cannot go on forever will not stop. some of the forces pushing down the housing market can't go on forever. we've had no households have not been for me, so people are continuing to live with her for her roommates are in an apparent spacemen or whatever. that can't go on forever or will have some very unhappy families. we are to do. were going to have to replace dilapidated housing at some point. some parts of this can't go on
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forever, but there is still a lot of downward pressure. there is still 10 million americans who owe more on their house and their houses were. that means, as introductions to commit the changes can't just there has if they get into trouble. we have foreclosures in front of us and the cycle of foreclosures causing equity loss, equity less causing foreclosures is something we still haven't broken into. the impediments remains -- i mean, we've had this problem before. the great depression did not begin in the housing market if the bubble was not housing the stock market. when times are that bad, that heart can be the foreclosure crisis as the great depression. but the new gillette agencies, homeowners owned corporation was a remarkably successful program according to arthur sausage or,
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historian of the area, it saved for middle-class and a pop foreclosures -- they bought mortgages at a deep discount from the portfolios have failed banks are those from the days before safety and soundness regulation and accounting concerns and there are plenty of banks quite willing to sell mortgages for a bird in the hand. and so, they bought deep discount, which gave them the room to negotiate and reduce a principal and even though they managed the agency more like social workers and lenders, when the agency finally close to, it actually turned profit. so we know we can make this work. the mystery is why it hasn't happened now. the securitization of mortgages,
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who owns them and manages them as part of it. the safety and soundness and accounting concerns about not wanting to recognize losses is probably part of it. the honest to god competences servicers because of the way they are paid, they simply don't have enough resources to do the job is part of it, but the people who are effected, the investors in mortgages have not been in a position to cut a deal to limit their losses. >> thank you. mr. deutsch, where do you think we are as a housing market in the real recovery? is negative equity problem for the market, or will the problem take care of itself? >> again the latter problem this may be the first and only time steven and i will agree on the
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panel is practicing what may come forward here is that i do agree with steven, it has been negative 30 has been a significant problem for fun in the process. for homeowners is certainly devastating to go from buying a house, putting a down payment on to not only money on the house, even if they were to sell the house. certainly for investors who put up money to lend to those individuals through the securitization process and private mortgages in the trillion dollars outstanding for the american taxpayer has $5.5 trillion of mortgage debt guaranteed by fannie, freddie were ginny mae. obviously, if the underlying collateral is less than out on the mortgage, it's clearly not going to be money to them. aleman has been a tremendous loss to the american economy and the individuals that are part of
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the money and certainly folks that of unspent money, whether it's to the american taxpayer and gics are the pension funds, mutual funds in the lake who bought and owned mortgage-backed securities. to answer the first part of the question, where are we, that is where i would disagree with stephen is ever clearly not having person most tremendous storm, but starting to come out. as an example, the opinion marks, san bernardino county was mentioned as one of the areas that should look at as being one of the ground zero's of negative home price appreciation. what we've seen of him or if you know, just evaluating the number of loans in default in that county is that in june 2009, about 31,000. june 2010 was 25,000. june 2011, 18,000. june 2012, 12,000. the percentage change in default
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of london that county, which you could argue his ground zero for negative home price appreciation has gone down 61%. the mere facts are that signaled to me we are not in the middle were not going into the storm here. we are starting to come out. doesn't mean that one make life any better for the person whose challenge to make a mortgage payment. does that make life easier for some of us want under 50% ltb, but the signal is an economy, as the nation moving away from the center part of it and towards areas where we've got four home price stability. even markets at phoenix,, using rapid home price appreciation. it's been 20, 2530% year-over-year to 2012, were you in three markets of israeli pouring down precipitously and now shooting up with the same velocity.
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>> can he talk about this issue from the neighborhood and municipality point of view? was going out on the ground right now? >> maybe i can be the bridge builder a little bit to say that we are seeing improvements across all markets and i think that's a very positive sign. the downside is that damage has been so heavily concentrated in a handful of states and within those states a handful of communities have been so disproportionally damaged, that even though the numbers are looking positive come in fact in those communities they are still struggling. so the extensive amount of underwater data are contributing to those sales at stores to hire and claimant unnecessarily so and families headed to foreclosure because of loss of income for a loss of a job if they could in fact find relief to principal reduction in order
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to save their home, that would seem from a public policy standpoint to be a positive turn of events that would help promote and stimulate even faster than the slow recovery is experiencing, even marcasite san bernardino county. so i would say i don't see us heading into an abyss. that part is over even in the worst markets. i don't think we reached a point to reconsider markets are recovering outcomes we can walk away and let the market do something. the unfortunate part about this whole conversation is weird looking at imminent domain, which is one of the most extreme things that a public entity could do, which is the taking of private property would affect so many things could be done that are not as extreme to help make a foreclosure crisis. but look at principal reduction to the hand program. fannie mae and freddie mac are not pursuing, you dollars a
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pair. federal finance agency showed been a positive to tax payers and hope to recover in communities like san bernardino it's not happening. services have a lot more flexibility than they pursued in order to modify loans, putting principal reductions. aqua and financial has been a leader in a principal reduction program. there's also things like bankruptcy protection in a federal level debated in congress, would cost the american public nothing. if i put a household under financial distress to restructure the debt on their family home and keep it. if you own a luxury yacht, if you own luxury yacht as a rental property, you can restructure debt, but she can't if you're a moderate memo income that has a simple home is to principal asset. the factory in this conversation is unfortunate because many
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things can happen before we have to go to an extreme measure of eminent domain. >> does everyone agree that principal reduction is in fact what has to happen? later in the conversation at church tax people, but does everyone agree that principal reductions is that we have to provide people underwater to get them to be able to participate in our economy or not? >> will get to it, stephen. particularly borrowers who have shown no sign of distress, who haven't had life event, having had divorced, haven't had a loss of jobs or income. if they are demonstrating ability to pay their mortgage to the crisis since i was seven, 08 is your initial plan had proposed, i don't think those are appropriate to go to principal reduction because they
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haven't signaled an inability or event that causes them to go into delinquency. >> so we should punish them for the fact they been honoring and paying appropriately someone to provide physical reduction, we say you've been a good case he don't get it. but that guy over there has been a bad guy. give it to him. >> i'm not saying we'll put them in a stockade and punish them because they are paid on mortgages. what i'm saying is they have an ability to show no signs of distress. they have an ability to pay that mortgage. so if they lose their job and have an inability to pay it, every service or should immediately look to some kind of forbearance program for them in that circumstance in hopes that at some point will get a job i may go forward basis of the next six to nine month and we soon paid on a mortgage. to say every borrower has underwater, let's cut away their mortgage principal is a massive disservice to the $5.5 trillion
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the american taxpayer when after fannie and freddie and the chilling dollars of outstanding mortgage debt for private-label securities that mutual funds and pension funds have one to borrowers as well. you can't say we should just give away money to these types of borrowers just because it's unfortunate it on underwater. >> it would be useful for folks watching this debate who may not be familiar to hear more voucher proposal and the issues, just the beginning out out on the table and then we can continue this line. >> the first thing is it's important for people in the audience to understand and tom made a good point of this earlier, which is america's mortgages are not owned by banks, which is what everyone who sins. thanks so much than 20% of american mortgages. the bulk of the balance as tom pointed out are insured by freddie and fannie. that's only cost us as taxpayers a few hundred billion dollars so far for that guarantee.
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but there is a small segment around 4.7 million blogs is the number on the securitizations. when you hear of mortgage-backed securities, about 4.7 million borrowers, about a chilling dollars as tom indicated. we focus primarily on that segment. the pla site and because those bondholders, investors in the securities do not have the benefit of the united states government guarantee on their performance. they live or die by the fact you pay your mortgage or you don't. because of that, the securities trade markets. they reflect the fact are huge problems in that committee. right now is the perfect time to put the site up. so just to frame this, just so i can see it here, this is an adaptation from one page and
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third-quarter 10 q. this is the united states government view of the pla site or with respect to that portion of the bonds that they own. the other question is why fannie mae owns these bonds as well, but they do on some and under their disclosure rules, they tell us what they think about the underlying mortgages. these are the numbers you want to look at. fannie mae says there's about $28 billion on their balance exposure to mortgages in this sector. they expect a 50% default rate. this is going forward on the existing holding. 50% default rate. when it defaulted us to foreclosure, the expected 66% loss under that mortgage. two thirds of the principal written down. so what it tells you is fannie
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mae believes this earthly two-minute order a million more foreclosures coming just in the pla sector. so are we focused on these mortgages? by the way, we think fannie and freddie have other avenues. all the programs you talk about for reform and homeowners, most of those programs are not eligible to be used in this sector. pls homeowner has very few options. our thesis is by allowing these homeowners to write down the principal reduction, which are medically reduce the number of foreclosures and allow the homeowner to stay in their homes. the objective program is allowing homeowners to stay in their home. so how do you do that? heavyweight of the principal? would be great is the service or
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device to try some you know, you're going to have 50% of your people defaulting annual boost to thursday money and your bonds already treat reflect not. if taken on so witty. why don't we stay in the house and simply write down their mortgage? for structural reasons that time is better than me, they can't write this down. there's a whole bunch of things they can't do. they are stuck in that trust and it turned out we found a way in which to get the home mortgage taken out is that trust and put in the hands of someone who hasn't invested reason to keep that homeowner is his local community and they looked around and decided the only way you could get that low out of the trust was using the power communities have been handed down and that is the power of
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condemnation. i said this a couple times. i'm not as as they look. if we could find any other way, don't you think would've come up with that idea because we understand controversy associated. here's what i'll tell you. there is no other way. that's how they got there and the local community can condemn that mortgage, take it out of the trust. by the way, patronis fair value. fannie mae will pay you the fair value. the owner of the mortgage gets exactly the value in today's market and then re-underwrite three new standard. that is in essence the program was put forth that are discussing with several dozen communities around the united states. >> is there really no other way? [inaudible] >> steve argues that there is an
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ability for services to write to respond private-label securitize phones. absolutely false. in fact, writing to any principle forgiveness has been increasing over time and private people securitize phones. you may be confusing that with gse loans. this mobility for a service or of a fannie or freddie loved. so there is a distinction. second, we, mrp can't figure out a way to get these phones out. it's because mrp doesn't actually on the loans. but they're proposing that the core of his proposal is mrp wants to take loans from somebody else. that in essence is that eminent domain is all about. the person doesn't want to cellulose, so you grab them without that person's consent. we'll come back to the legal issues throughout the discussion here, but sticking to the policy
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side of it is there is a reason why you can't get out of the trust. the reason is the united states government, tax law does not allow laws to be sold out. so when you come back to the legal analysis and figuring out whether mrp's proposal would violate commerce, the clear answer is because the loans are regulated in the stress, bloggers and allow them to be sold out. in fact it allow them to be written within the trust as long as the service or believes that's in the best interest of the investor. servicers in fact are not operated on behalf of the best interest of investors in the investors sophisticated are duped by their service or not to do the right thing on the phone. i have a very hard time going back to institutional investors diminished choice of dollars of
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assets going back and saying, your irrational. you don't know what you're doing. go tell services to write down massive amounts of usable in your best interest. if you thought that was their best interest, they'd be doing it. they be telling them you support as appropriate. if someone is his job and, undertake a program that ocwen has proposed to put into effect right on principles, gave shared appreciation in the circumstances. if someone took out a lot, hasn't had any distress and then is able to pay their mortgage, what is the sense in saying let's wipe away all of the underwater debt because that is better for those individuals. this certainly would be better, but all the pension money and institutional money fund would be wiped away. in fact, moody said a great study would mrp's proposal came out and said if he were to take
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mrp's proposal, in limited nationwide, 30% of the value of private label mortgage-backed securities would disappear overnight. since there is $1 trillion of outstanding securities, that is $300 billion would be lost by pension funds, mutual funds and other funds in the universe. that combined is much but infinium freddie have lost, which is about $200 billion. >> on this, it's absolutely the key servicers to in the best interest of investors and i think the lack of interest between investors and servicers and trustees is the reason so many institutional investors have resigned in the organization because they think that trustees are not acting in
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their interest and that their interests would be best served. after reasonable negotiations. they are certainly concerned about this proposal, but part is i don't think trustees can be counted upon to act in their interest in a condemnation proceeding, that they won't fight for fair market value. they'll throw the towel because they've got nothing to lose. this is a screwed up system. >> is that a technical term? >> yes, it is. not sure if that's a legal or economic term. history the constitution is not a suicide pact, mortgage agreements are pretty much suicide pacts. they do separate out from the investors, management and management has incentives not to modify mortgages in the best
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interest of the investors. you know, when he mortgages foreclosed upon, they are 50% more. it's obvious that investors would love to see logical reductions of principles so homeowners who can't pay a mortgage on the house will be unsustainable mortgage and they don't have to foreclose and it's not happening. we can argue why exactly it's not happening, but clearly it is not happening. that is the advantage of bankruptcy, which you work for, i was for. i introduced a bill in the house. that got beaten back in the senate, defeated by the banking interest and that is the advantage of and minute of
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being. it's an eminent power that doesn't worry about the scope of interest about power. it takes something for public purpose. property for public purpose fair market value, a lot less than what is carried on and shown in his books and modify a new out of business bottle actually works. i understand concerns of investors their interests will not be invested, but some things really got to give. >> one of the questions about the proposal is at least in the primary thrust of it, it targets homeowners paying mortgage. does that concern you at all? to think eminent domain should be used for homeowners purchase
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to cut through for anybody? >> of phrasebook lawyers and economists like, it depends. i think where we don't want to be, which tom described earlier is not shown they're going to default and then not modifying because you don't want to reward them for nonperformance. you don't have much left. it does need to be tailored to circumstances. probably specifically whether a homeowner is unable to pay this mortgage and likely default to boost their home to foreclosure and would they be able to form for a lesser amount they would be a better geo-than what
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foreclosure. >> in the past, and a domain is a power often used in ways that disadvantaged of color and is there any concern about whether this is an expansion of the powers of condemnation and any concerns about that. >> i want to get to that because the show concerns about the use of eminent domain. but i just want to say first about the idea that servicers acting rationally really want to come back for just a second. we wouldn't have the 49 state attorneys general supplement. we wouldn't have occ concluded yesterday another multibillion dollar settlement if in fact services actually rational. so it would be good if they were because we would have probably into this foreclosure crisis at least two or three years ago. having said that, there are concerns with respect to help
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eminent domain could be used in a circumstance, depending how the loans are selected, how the program is designed, it could be that individuals who actually need assistance at least, actually get the benefit of those who are really struggling don't. at a minimum, a program would be designed such that the highest priority would be people who experience some type of financial distress such that the principal reduction allows them to remain homeowners. the second thing is depending how those are selected, they could have an adverse consequence at a neighborhood level. that is to say about to be selected in non-hispanic white communities, but not necessarily latino and african-american communities. it depends on the product, criteria for the situation, housing types, et cetera. i think the real concerns from a
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perspective of how it can be used. i also say not necessarily in the race deep respect if, but a housing market perspective, the clear title could be crowded the kelley as soon as investors start to sue because my guess in thomas nodding yes the therapy lawsuits initially, the first taken of a distressed love. if that occurs, it's questionable whether the loan -- the house could be sold to its original owner or rather the person who batted actually work through. there's concerns about this issue. >> eminent domain is one of the most commonly used government powers. at the next remark unusual about it. we would not build a straight road. there's no way a city could take 10 feet up everybody's front yard so they could have
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sidewalks in the neighborhood. it is one of the most commonly used powers everywhere in america right now. said municipality takes something for purpose and everywhere in every state in america right now, probably a jury deliberating about fair market value is. this has been around for a long time. the reason that eminent domain were taking suspension of the fifth amendment was not to give it power to government, but restrain the power to make sure the government to take property taken for public purpose, for just compensation. there are procedures for doubt. this is not unusual. if you had to municipality lawyer and said we want to do a condemnation, he would scratch his head and say i've never heard of that. they do it all the time and
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there are procedures to take care, to start to use it and put to the side to be determined later subjugation the value. a the colloquial term lawyer sues. we were christopher. we done it a lot. we have it done with respect to mortgages, but we have done it with other kinds of property. we have had a closer crisis is tempted us to use for mortgages. >> i want to comment on that because i totally agree 10 feet of property in order for the highway is different from targeting neighborhoods to take take all areas. the history of eminent domain is one of the most distressing uses of public power in history as it respects communities of color come to the was based on inappropriate use of eminent domain.
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the naacp testified two years ago to congress about identification abuses of eminent domain from cities in california to rhode island. so it is a problem in the past. it has been a problem in the past. there remains a problem today. so communities use it all the time. quite appropriately come in many communities inappropriately as well. >> i don't think any government power has not been used unjustly when it comes to race. the homeowners loan corp., which is celebrated earlier is a great problem, which was very inequitable in helping white homeowners do not african-americans and sends it practice began with incorporation. they were the first wednesday said we will not modify
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mortgages in these neighborhoods. so we will not be able to take a step further as a nation if we don't exercise government powers that have over the course of our history been used just late between african-americans and latinos in ways because none hotbed. we are not talking about property here. we are not talking about houses for a living trade for some things that robert moses did in new york and long island. we are talking about trying to preserve neighborhood, trying to take mortgages so they can be reduced to the person who lives in that home can continue to live in that home and that home is not going to sit vacant, boarded up knee-high. >> the debate really is the assumption the home is going to be last to foreclosure. for the last five years has paid
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the mortgage, then underwater through the whole time, whether san bernardino or phoenix or somewhere else, to start with the assumption for closure will happen on that home, that starts a debate that can't be won because you assume it doesn't actually occur is if the borrower has the ability to pay it, they will continue. >> that if somebody in a negative equity position is that far higher risk of foreclosure and someone who has equity in their home. ..
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>> their best opportunity to get another job is 50,000. that may not be an option. >> i only have 100 things to comment on. [laughter] characterized as the mrp
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program is not the mrp. that is a convenience for tom. but i will make three general comments. communities of color. anyone who thinks this is not disproportionately affecting communities is kidding themselves. we have wiped out latino wealth through the crisis. so with eminent domain used to starkly but the housing crisis has leverage with communities of color. i have a lot to say about tom's analysis that is flawed in many ways. especially with moody's when the cycle crashed the if you
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adopted a program that they recommended, there would be 300 billion. use logic. our program calls on communities to pay the value of the underlying mortgage a fair value. so the notion of the $300 billion loss is absurd. it is flat out wrong. moody's has been wrong many, many times. i don't want to pick a fight, but maybe i do. [laughter] this crisis was brought on by tom and his colleagues. not him personally. [laughter] but securitization. to make a comment now to
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benefit by a the continuing excess payments with homeowners under water to continue to make payments because they think they should morally that is a transfer of wealth for those were under pressure are under water but most importantly, lookit foreclosed homes. and the largest a buyer. it is not the first time home buyer but it is wall street. who are not buying these homes. we turn ownership communities into a tennessee -- tenant communities.
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then that benefit will rise not to the existing homeowners but to the aggregate. i will stop. >> give tom a chance. >> now that you can see i am truly the wizard manipulating the outstanding mortgage market. it is me. far -- fair market value. with eminent domain he says it is developed by the cities but now one city has developed in the.domain program when you hear from sandy know was devised by mrp it is called joint powers authority. like you have the joint powers authority?
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a simple answer is they need to create a special purpose vehicle. in with this quick take to take the mortgage and decide how much to pay later. with the analysis you only pay between 70 and 80 percent of the appraised value. mrp has a foreclosure discount for those who are current on the mortgage. with a separate legal entity they take the mortgage to say we pay later. then through the mrp refinance the mortgages through fha.
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but let me finish. through the program is determined later it was not free market value, the joint powers authority can be bankrupted it and nobody wins but the institutional investor with a pension funds who did not get fair market value now the mortgages are ripped off. >> i did not practice there. i/o lawyer but in fact, the condemning authority deposits with the court after they tried to negotiate with the property owner, they deposit what they think the value is worth then the property owner can take the money and
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still contest the valuation and get paid more. if they lose, they may have to pay back but the authority does have to pay something into the court to take the property. >> at the risk of giving tom a heart attack. i will agree with several things he said. he may not be able to go back to his office. [laughter] but i do believe there is potential of the proposal of the eminent domain. beyond the individual loans purchased. it goes into use servicers and investors recognizing a bid to make better decisions , somebody may make that -- take the decision
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from them so the fact the committee is he has stepped up to the plate. i agree with tom wear if we assume there cannot be negative implications because the program is in place and households are in distress, that is not a reasonable assumption. so not with the program is designed but the borrowers have to be current the one boy is suspect that a disproportionate share how people may be behind because it maybe from loss of income and given the benefit for
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those who need it from public policy but not in immediate distress. so that alone says the program deserves a second look. i agree there is real potential of the eminent domain purpose but if we walk into assuming the households that needed the most thinly have every unfair and an equal outcome. i also agree with tom, you cannot go back to your office. whole neighborhoods are targeted if they are upside-down. if the loan is purchased and sold back to the original owner what guarantees it will be sold back is like
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one of -- order the standards to buy back the home? >> no hold is bought or the loan is not sold back everybody assumes they know everything about the program. i go. we work with communities is the current homeowner? do you want people to pre-qualify? we will lay out and you as a community how do you bring this back? this is not one-size-fits-all.
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but the community's are the most heavily minority communities in the country. >> talk about how bad with the foreclosure crisis. with a loss of net worth and publisherpublisher s with the economic study over the last couple weeks and loss of value is in the neighborhood of foreclosures. it is a home on your block that is vacant and boarded up and weeds are growing.
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but specifically a great deal is foreclosures in neighborhood after american latino neighborhoods suffer disproportionately by the enormous margin. one study found the median household have lost 46% of their net worth in the housing crisis. that is a stunning number. since 1969 we are a different nation now. the sow with incoming quality and wealth and with low income neighborhoods
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there have been many foreclosures. household words was 91%. >> we do need to target that is the key point* those of a challenge paying there mortgages. don't come up with the program not those who have difficulty paying there mortgage. let me pull the of cornerback with the mrp program to meet the needs of the community. of that was true it should be enough for profit but they are registered with the
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sec to require full investment fund the profit motive is to make money that is not congruent to meet the needs of the community. so to take those other current in their loans, they cherry pick so go find the highest ficus score they will take those mortgages away who are valued in appropriately in now have a profitable loan proposed to sell back to make a significant profit with a 30% return. if that program works to pay fair market value how do
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they pay 20 or 30%? >> circle back if the mrp makes money or it is a nonprofit 30,000 municipalities will get some version of this. they are hurting and have not been getting help. i am curious. i want to ask this. if you say no to everything. >> there are a lot of proposals stuff that nobody reads jackson a professor at harvard wrote an article for "christian science monitor."
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this was proposed doing this with federal funds and i wrote an article march 2010 suggesting treasury could use the tarpaulins enact as a homeowner loan corporation had done. but not for profit the americans securitization was not for that either. >> i am not opposed to the concept of the eminent domain for those who are current but the priority is those who experience financial distress then there are other test to be put into place before there is a vote of yes or no to
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keep the mortgage current chief force the homeowner to go into default before they wrecked their credit score and cannot buy clothes, food , , etc., etc.. there are parameters that is not just a cut off i am not paying today or yesterday. >> just to major people have the fact i make no apologies mrp is for-profit sometimes that is how problems are solved. second, we're not april of capital we charge a fee, $4,500 if we
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successfully help them keep the homeowner in the home. where it may get that number? it turns out the federal government will pay that to the servicer to modify a loan who has no risk. that it is the deal. that is what we will use that is to be our there is refinancing activity to take place of the that is not exactly true. we have to raise the money where else would you get the money?
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they need to be given a return. we don't promise them anything. what return would required to invest? so i just have the facts it is not like it is bad. >> i cannot believe we start and end agreeing with each other. [laughter] i agree for people to put up capital they have to feel they get the appropriate return. if you change the rules if we have never gone through this program with the court thinks is fair market value
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we will take the money away what will happen with the mortgages they do get to a fundamental right debate we will not get the taxpayer off the hook because institutional investors say they took these mortgages are fair market value but it does seem the logical to find a way to get out of the housing crisis which reduces things to scare the investors away. >> i cannot resist. this pricing like it is a mystery to agree on fair market value.
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i will use the government's numbers that is what we told people we would do. not magic but the exact number fannie mae itself sells -- tells us what it is worse but that is the proposal on the screen. >> '01 to go to the audience a chance to ask questions. i have more but we will take turns. >> i am an organizer with the service employees union. if we cannot changed roles you change the rules but the economy and what does to bail you out to save the economy but you kept going
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on. we bailed you out to save homeowners. you already wrote the play book now we want to do change that to benefit us. i do not buy that. otherwise nothing will happen for us. >> questions? [laughter] >> i have a question for tom and others. could you expand on the impact of fha and long term consequences of the security market? >> first, the crew has focused on going pastor of
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private mortgage backed securities but what about the fha loans? most are originated 3% down payment more or less. so with the underwater mortgages we should be focused on those that have the big pile of underwater mortgages. if we say that to go private lead then what about fannie and freddie? that is where taxpayers need to focus. second, what is the long-term implications to the securities market? as the chinese investor to go into real estate. it will be challenging but would get the united states
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government to take their property so the mrp folks can design the community needs. that is serious long-term disruption to the credit market. how brief expanding and freddie? it makes it more impossible than it already is. >> the argument in the future we may do this again but we have never done it in the past. the reason is lead never had a foreclosure crisis like this. absence of a foreclosure crisis, why would you do this unless you have a problem with declining home values?
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that is like the emergency room saying it is cardiac arrest but i did not want to use a defibrillator. there is not the incentive and thus we have circumstances like we have got to >> it is not clear you can use eminent domain with the fha guaranteed because it maybes of federal property. says the threat what happens? it is not clear if a community chose to do so, could be legal that is a scare tactic but what about everybody else?
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>> but for the local community to take federal property potentially is illegal. >> i wanted to percent agree. 10% are owned by fannie and freddie fhfa is a private label then you take federal government property which the fhfa has indicated publicly and may have to step in the glee if you take federal property to interfere with their conservatorship powers. >> it is not all or nothing. the present value calculations has been around if those loans identified i from the net present value then that could be explained
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to any investor and this is what have been to willy-nilly. there are ways the program could work for the securities market is not impacted than they would say i am understand that. it makes sense. but the challenge is the details how the program is structured. >>. >> mike complement's for putting together this panel. there are many investors betting dollars of problem with the of solution but i want to direct my question
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knu reiterate how something impacts the union, seniors and what dorothy's unforeseen consequences that they are attempting the worthwhile program? while the help a few may impact many americans. >> that was an outstanding question. that is the issue. seniors could benefit from the program to be current in their mortgage but that makes no sense of their 70 years old and have the possibility to never pay off the loan. adjusting principle could be reasonable. details is where the eminent
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domain conversation should be. >> but the question of unions is they have an interest with homeowners in trouble but also administering pension funds? >> stephen took a shot at the securitization process. at its simplest point* older americans like a retiring police officer has pension money that is invested somewhere. usually through mortgage-backed security to allow the lender to take the money and give it to somebody else. second, you take money and giving it to people who want
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to buy a house. the problem with the eminent domain proposals leading to the mutual-fund to say i want to help the homeowner and at the expense from the pension which is wrong. >> with a slightly different participation those who find themselves under water. that is who it is. the pension fund but to think of the constituents we know have a devastating problem holding back the governor's construction jobs and about a community that
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says we will pay fair value. so that turned that mortgage into cash. to negotiate. that but they should be enthusiastic is even good for my return along with my constituents. >> from the investor side with present value it is back to a net positive for the pension fund. >> it is true investors have been allies even though you got this wrong but working
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families benefit it a couple of ways that day are homeowners and it affects their net worth and life-saving is. they care about jobs and affected by the jobs crisis with the effect of consumer demand and with the pension fund, if they are paid fair market value. that is what it means, they pay what it is worth. it should not hurt the pension fund. investors don't think with some justification they can
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count on these servicers to protect also when there is the condemnation to come out anyway, the money goes straight to the investors. i am not sure how to fix it that would encourage that are considering this and are that this is not the only a proposal but to pressure you you are kidding craved -- paid fair market value. >> let me see if i can get and ally on the panel. do you think it is
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appropriate to to trust that they would get the fair market value right to? that is easy. >> the reality. [laughter] going into the details how the program is designed. and has alluded to this you don't understand how the program is designed but that is the problem the design is rather rubber meets the road the only loans eligible for purpose -- purchased by those for homeowner that is
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a very different conversation with of the diversification of loans and the homeowner is upside down with no other parameter. >> i want to get more questions. >> it is such a common legal concept juries are deliberating over fair market value. there are ways to prove its, comparable sales, a valuation based on income. >> if you take the numbers. >> and i am sure it is inadmissible to produce their own economist and.
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>> but steven has said to show's third quarter from 2012 they appreciate 20% with that period of time. does that sound like a good deal? >>. >> this is from a different perspective you overlooked a major group of folks. i don't have a pension so look in major cities, i
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live-in egg salad -- the alexandria. mortgages were given to people who could not afford to buy homes or keep their mortgage. affordable housing is an issue for those that want to be developed and the eminent domain is scary. i think fed -- freddie in fannie need to go way. do you have to change the guidelines like the case of rhode island to save the will take your home to redevelop and other community and change of law
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because they tried that in alexandria stopped the restaurant to take away the alley and how to address the law or do we say everybody has to be a homeowner? it is a cage to be a renter. we do not talk about at that at all. >> nobody else? [laughter] what i was alluding to earlier was if the program does not require the previous owner has the right to buy the home back, those loans to be purchased
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sending the owner out of their home. but what if the government uses that authority that by definition upside down so we purchased it now we will use your property for other purposes? >> for the most part they're not taking them home but the mortgage. but it just owes a mortgage to a different person. >> but to take on an owner occupied homes and radio under once somebody to negotiate quote with them.
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i think that is a connecticut case and is not have a lot to do with the circumstances. >>. >> a and with all manner of property interest including leaseholders. what is fair market value? is for public purpose. >> we will get one more audience question. >> i am from george washington university. the housing market was coming back but is there anybody on the panel to what extent does this show
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gentrification to displace low income people that has nothing to do with job loss but property values in the neighborhood? >> i think for mere question first of all, i am not can -- and highly convinced we're not at fault but but the fact that it cannot the one forever and there will stop. but the fact there were going so far but already there has been damaged, pressures, and frugivorous, for those to by the bigger house but they
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don't have any equity. there is still pressure. we have had five years of housing starts being one-third of the natural demand before the bubble and some excess we have to burn off. and it comes from do household formation and second homes and replacing dilapidated housing. >> one last question. >> my name is john and i and stevens partner. congressman miller put the challenge down 40 tend to sit down to talk price.
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when should we come sit down with your organization to talk price? >> i think we could sell tickets and make a lot of money. [laughter] >> i want to take one more audience question. >> from the mortgage bankers association, you mentioned earlier you were in the community to develop a solution and to you plan to extend that to the level to work with the political leadership with a tailored appraisal and a methodology
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that makes the most sense individually? >> but in the eminent domain procedure you used comparable-store and we spent time on that today but john was not being facetious all of this logo way. if investors think they were probie will go through them to look at their houses but they're not customized solutions.
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>> but the key question and he differential is what emmett domain involuntary brings to the state. >> now we have a couple of last ones. >> this is not an unusual government power. therein is pager eight determining fair market value, a property damage, but securitization
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is so screwed up that they can trust anyone to protect there interests. with fair market value seller agreeing to sell it to a buyer, there is not a concern but they're concerned the servicers will throw in the towel. if we can get past that, i take this is a way to begin to get control but of many communities across the
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country are hamstrung by extraordinary amounts of them -- upside down debt. it is viable and should be discussed and should have a huge impact on the market. there are abuses of so it has to be clearly defined and will monitored. this could be an extraordinary opportunity in housing market especially that those folks from various.
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issues he wants to talk to. february 1st we will have a panel of the question of down payment. with a first-time home buyer. thank you to the panelists who were fantastic. this was fun and we hope to have you back here soon. thank you for coming
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>> welcome to the urban institute first tuesday. the topic is the fiscal cliff.
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those in the room watching on c-span and on the web. i'm a resident fellow with the urban institute. the fiscal cliff is a phrase most of us here reeve would never hear a hint that if proven to be a fiscal who heard -- to fix the deficit. republicans would consent to raise taxes and democrats will halt on the spending those massive increases would happen if we would go over the cliff. others suggested congress and the white house would agree on one thing and to find a way to cut consequences through delay.
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that is what some of it to explain what happened and over the last few months we have the most respected experts. >> former member of the president bush counsel and director of tax policy center. rudy, former director of cbo and before we get started housekeeping issues. each speaker will speak five
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or six minutes then be open to questions from you. watching on c-span or the web you may send us questions. and please keep this question brief. >> happy new year. we sit here on january 8 and it is already crazy busy with tax policy. to talk about the consequences, back in october we issued a report
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with the primary results of that study i want to remind those. the chart so with it being in percentage points than use see on average but that would be a giant tax increase. on the left is households by the income they earn and go from lowest to top. a the middle quintile were
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scheduled to have a tax increase of four percentage points raising 14% 32% which is the equivalent of to sell some dollars. but to raise the tax rate from 31% up that 38 percent. the conclusion is it is a big deal for all americans. lowest to highest but varying with different income levels. fee of their big results is
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the common theme and lithos bush tax cuts that would grab the headline. but we went through all tax provisions part of the fiscal cliff. we went into nine bins and that it would be useful to track them. you can see it on your sheet. the amt tax patch we've lived through the decade it was to expand and renovate questions is if they would do that?
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tax cuts enacted under bush primarily affected low or moderate house told and also those that predicted those with capital gains and dividends. in orange there is the estate tax scheduled to go up. with a leiter orange. >> those that were scheduled to expire at the end of last year actually expired at the beginning of the year. you can see those focused on moderate income and that
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they had to use every day you can see that in particular a fax people at all income levels and was set to expire at the end of last year. also, in the purple color the taxes were initially scheduled at the beginning of this and to know if the fifth thing works then duva fixes you can visualize in your mind. [laughter] the buyers are much lower than were scheduled.
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rough order of magnitude, avoiding just last two-thirds of the fiscal cliff. but for most americans was the expiration of the payroll tax cut. of existing u.s. and would know when we would go way and congress decides now was the time. issues later it can expire evection lead to a percentage points but to talk about the cliff but but
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to focus on those make intuitive $50,000 or more. but those tax cuts were not allowed to continue and most expired. the gray bars are larger than those that go into effect. otherwise they just keep that capital gains rates. a and the fiscal cliff has the old the 39.six tax bracket kick yen, with the
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deal that was struck those who have taxable income for hundred $50,000 or higher. but when has it been patched or not? it is now permanent. the lausanne to middle income tax cuts under bush were fully extended. obama as credits but you can see if there is the extender deal but did not avoid all of it but the vast majority.
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but looking at an average tax increase at the highest was 75%. with low and moderate -- moderate income levels with the tax increases but the top 1% did not get a break. . . . .
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at least for a few weeks. and there wasn't a collapse of financial markets. service and huge tax increases on all of the above the other day ramifications pundits had been hyperventilating about for two months. didn't come to pass. quite naturally we had a few glasses of wine and i was told that i had to defend my score and why it was so pessimistic,
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which aged by explaining what i thought would be needed to earn a 10 and then comparing it to what we've got at the other end. now i want to note that after 42 years of washington, i'm not so naïve to believe that we ever could've done anything close to a 10, but given the domestic political environment, international situation, the weakness of our economy, you know, ugly nothing but a southerner he was in the cards, but it's worth looking at a 10 and comparing it to what we have two realize where we are not the best of all possible worlds at this point. okay, issue one is really the big enchilada, which is dealing with the long-term fiscal balance that we phase and i
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would have given a 10 to what folks were talking about, but was unachievable, which was the grand bargain between the president and the congressional leaders on a package of tax and spending policies that over the next 10, 12 years would've stabilized the debt to gdp ratio and that would've been a package somewhere in the two to $3 trillion range. of course there really wasn't time, the tightening between the election in january 1st to recover details. so if you respect even of the fact that we have a two political parties snarling at each other and not a whole lot in the way of negotiations, there really wasn't in the
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cards, but a nine, which would have come from enacting some big pieces, down payment accompanied a framework that specifies how the rest of the puzzle would be put together over the next six months with some credible enforcement mechanism that would ensure that the balance of the undone task with viacom pushed. such a framework might have included an agreement to increase revenues from tax reform, reduce entitlements than he threw similar reforms is somewhere around $1.2 trillion on each side minus whatever was part of the down payment agreement. of course we came up a bit short of this. so too is the charitable grade.
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a second bit concerned about the fiscal cliff issue was that it had dire consequences for our fragile economy and we might have pushed the economy back into recession as cbo and others have worn if the fiscal cliff was prolonged and went for a full calendar or fiscal year. none of that within the cars approver for two weeks, two months, whatever. a score of 10 on this dimension would have included comment in my view, some short-term measures to stimulate the economy, combined with this two to $3 trillion reduction in deficits over a 10 year period,
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but given the political makeup, that was number in the cards. what about a nine? a nine would've adhered to the hippocratic oath do no harm. on balance, i think we got it a grade on this. extended unemployment would continue for another year or in the states for the recession has hit most severely. the majority of taxpayers simply refer to 99.3% of the population was scared an income tax increase and we enacted a permanent patch, thereby protect
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dean 30 odd million households from some in the were totally unaware they were about to get a rates, which was a very considerable liabilities for calendar year 2012. but on the other side, and why on this dimension the payroll tax holiday from which all working americans have benefited over the last two years was not continued and that will decrease take-home pay for the average american family is something over a thousand but then this is money that is going to reduce consumption. you know, a more sensible
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approach would have been to say we are going to face this out and i have been an advocate of phasing it out for over a year and extend one percentage point reduction in the payroll tax for 20 to team and then have it disappear in 2014. over on taxes, i would give the deal a very, very low score. the amount of revenue generated by the deal is far lower than presidents and democrats had hoped for an even lower than republicans seemed willing at various times to put on the table. tax code horrendously complicated component of american life and if anything, it's more complicated today than
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it was a few weeks ago. notwithstanding references to top 2% affected by higher income tax rates, the friction is something under 1% or something around there. so this was sacrifice visited upon a very, very tiny fraction of the population and just to make sure that, you know, that group didn't leave the table hungry, we made modifications in the estate tax that allowed for exceptions of $10 million per couple and index these in the future. so we made that a part of their lives a good deal happier. from my perspective, probably
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the worst in the failure to adhere to the initial $250,000 threshold from our higher tax burdens or to start if members of both parties quite vocally and quite prominently are saying that these three that we've adopted or permanent. we are permanently extending the bush tax credit and this will create the impression among many that tax, at least rates are off the table in the future when in fact we've done it order of maybe what we should do and that is very damaging. i think anyone who looks objectively at the budget challenges that lay ahead would have to conclude that if we are
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going to reduce deficit to accessible unsustainable levels and we're going to continue to provide the majority of americans with services they want unexpected services needed to make our economy competitive or continue to be competitive, either through higher rates are based bargaining or accommodation of the two, we're going to have to visit increase taxes on upper 1%, not 2%, probably not the 20%, that's a 30% or 40% of americans. the sooner we face up to the, the sooner we can get on to other important issues that the government should be addressing. fourth goal of the fiscal cliff negotiations is to provide more in the research and tea for
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those businesses, those responsible for it ministering federal, state and local programs and citizens dependent on government services. on this dimension, it's very hard to say they progress was made at all. the sequester solons. the debt ceiling hasn't been increased. continuing resolution, what this government is running on right now still runs out on march 27. the sustainable growth rate of 27.4% was pushed off for another year. in other words, we had everything we had before in the way of uncertainty. but the path forward is if any named mercury that was was on december 31st and in many ways, the consequences of failure to resolve any of these
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issues is probably greater now than they were at the end of 2012. finally, there is hope that a successful resolution of the fiscal cliff to be with those clear the decks for other important legislative priorities , immigration to name one and creative or constructive , less partisan, less toxic environment in which the congress can prove to be more to come to the executive branch relationships would be improved. on this dimension, i fear if they changed at all, they've deteriorated. at a minimum, the first six months of this calendar year will be absorbed trying to do with all of these issues that weren't resolved at the end of 2012 and we will just be
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consumed by sons of fiscal cliff coming you know, they might come in packages together what they might be individual components. we expect patience of the two parties for the next round are as wide if not later than they were several months ago and both parties have been drawing and retrying lines in the sand and unfortunately the syrian unsustainable place. was a tough grader? >> thank you for that domestic analysis. [laughter] rudy, can you give us anymore sense of optimism? >> thanks, howard. the question is what happens next. i suppose if i were really
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honestly say i don't have a clue. but it's fun to speculate even about bad things and i'll do my best to outdo bob's pessimism. [laughter] i think as he employed come at things certainly haven't started out auspiciously since the cliff deal was consummated. republicans are very upset because they feel the president not to in a campaign style meeting he had. they are not keen to negotiate the president for that and other reasons. on his part, the president has adamantly said he will not negotiate over the debt ceiling and this has led some republicans and some upgrade groups as well to advocate that where the congress should try to resolve this issue on its own
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using what they call regular order. i think what they mean by that is that the congress should go ahead, pass a budget resolution, how that resolution contained reconciliation instructions, which is a fancy phrase for having a tall various committees how much revenues to raise her how much to slow down the purpose then they and maybe to put something horrible and it, what will happen if they don't follow through. we saw how well that worked with the super committee. there's two basic problems with this approach. one is there simply isn't enough time. i suppose they could give themselves more time they temporarily raising the debt limit, post posing the sequester yet he could and extending the cr. but that would be extreme can
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kicking. but even if they give themselves more time, the congress as a whole hasn't passed a budget resolution must both the house and the senate passed around and the senate hasn't done that for a number of years. it would be even harder for them now because the one thing that the deal did was to put the lowest of the low-hanging fruit for increasing taxes on the hyper rich is somewhat significant amount and on the not so rich they somewhat lower amount. even if i'm wrong and the senate would be illiterate, but the budget resolution, i find hard to believe that a house-senate conference led by paul ryan and patty murray is going to come up with anything very useful. so my short-term prediction is that we will go back to relying on those old lawyer says
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mcconnell and the vice president, for some thing and i think we'll will witness is for pc arguing over how far to kick the can down the road this time. before the fiscal lift deal, as pessimistic and even worried they might fall of the cliff by accident, which luckily didn't happen. i think it's even less likely that we would default on the national debt by accident. during the cold war, we used to say the use of nuclear weapons was deterred by the so-called mad doctrine can be mutually assured destruction. i think if we really did default for a short period of time, that would truly be a nuclear war with devastating consequences. well, for the longer run, i've become even more and more depressed if that's possible.
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during the campaign, and bob implied this, but during the campaign, the president promised he could spare the middle-class germany pay in the form of tax increases for having to give out things they think they been promised and certainly republicans are not going to lead a crusade to raise middle-class taxes. so much to my surprise since the campaign, it seems to me the president has doubled down i often mentioning how much he will protect the middle-class and certainly the middle-class is very much in style with the republicans as well. but unfortunately, as bob implied, the arithmetic clearly shows that you can't solve this long-run budget problem without the middle-class making a
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contribution. the problem with rich people is there just aren't enough of them. even if you have simpson/bowles type reform, it is bound to raise the tax burden significantly with middle-class people who rely on deductions and exclusions. on the other side, they will not have a very happy second term unless a very large part of the long-run budget assault. otherwise, he's going to face a whole series of fiscal clips that restrict his ability to make progress on immigration reform, infrastructure, it better, as the jury. so i think he'd be very keen to cut a deal in another bout words
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to do so, but he certainly hasn't talked that way yet. so consequently, i feel no reason to at the end of the forecast had a keen for a very long time and that he said it's going to take a sovereign debt crisis to get our leaders to act responsibly. if that does happen, groups like aarp for adamantly opposed opposed even the tiniest of reforms of entitlement spending will see they have been very shortsighted. their constituents will be hurt i believe if the retirement savings evaporate in a market crash. what we sing in europe under similar circumstances, very genetic changes in pension without much notice.
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so i very much hope that will happen, but i'm not ready to change that in my forecast to. >> so bob and rudy gave us a less than optimistic prognostication. you're usually a pretty optimistic eye for an economist. is there anything that may turn out better? >> yeah, i was joking that sometimes i feel it pollyanna with low expectations. and so therefore, don't do it the absolute great, but going up at the was not a bad outcome. forgive me because this is a process oriented team. on enough for 10 years the one
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nice thing about this deal is it resolves what do you like it or not. they've been fighting this entire 10 years. not fully, patching the amt, hanging out ever since the tax cuts were enacted in 2001 and has a completely eliminated the amt, but has freed up mental bandwidths to not worry about what are we going to do about the amt this year back here. but on a personal sense i think about new things, but it's also true policymakers have limited bandwidth. if you say to them every year you've got to do an amt patch, that means bright talented people have to be some time on the hill figuring out how to do a patch. they are now free from that. same thing for the 2003 tax cut.
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anything in the washington news per minute. it would require new congressional effort to continue to go away and that frees up the issues bothered rudy were racing. same thing with the estate tax, the payroll tax cut, which is not a bad way to do it economic stimulus, but is now in the rearview mirror and now there is an opportunity for folks interested in tax to be more for the can, think about how you got your deductions and how you make it simpler. i'm not pollyanna-ish enough to think that's going to be easy we recognize one of the things we've lost as a leverage point of explorations, but i've become increasingly cynical at the
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actions to have it have been. we are free to mind share to think about the bigger issues raised. >> .just gave a good argument to make these permanent with a useful thing. they may not be because of the implication of the race are permanent and off the table, which are sensitive. this is a good thing or bad thing was made much of the code per minute? >> is a really good thing, which doesn't go directly to your question is that we did avoid this humongous tax increase that would've, served a recession had it been left that way. i guess i don't make as much out of calling these extensions per minute as donald and bob because
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i think we will be talking a great deal about tax reform over the next year and we won't be restrained by the notion we should keep these things study for a good long time and if we have tax reform and turned out well, we will have a simpler, more important tax code i don't want to underestimate that is going to be very, very hard if we raise revenues of tax reform. i don't think we will be restrained by what we did in this deal. >> i just want to say which is if you make something permanent, then there's no requirement for congress to deal with an issue.
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what she do is wait around, total found until the sovereign debt crisis forces you to do something. if you extend the tax cuts for two years, you know in two years there has to be a debate, nasty as it is the one we had, again forcing congress to be enacted is not hard. forcing it to act when the action implies unpleasant things for constituents is very hard but we also want those things to affect the most things possible. it could have given a three if i'd done the same task for three years that would be back in the fray again. just a comment on what your
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expectations teaches at georgetown and i want to be one of the student if he agrees on that kind of a curve. [laughter] >> is just going to say in the the good old days we changed the tax cause. it didn't seem to be as consistent as it was today. i really had a loss for what kind of thing that caused the congress to act in a sensible way and released the credibility of a sequestered, just hard to come up with their crises for that sort. in this sense, it would be

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